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Objectives:
After studying this lesson, you will be able to understand Meaning of industrialization and Industry Need for industrialization Role of industry in economic development Views of different Economists on industrialization.
Structure:
1.1 1.2 1.3 1.4 Introduction Definition of Industrialisation Need for Industrialization Role of Industry in economic development.
1.4.1 Structural changes in the economy 1.4.2 Beneficial effects on agricultural development 1.4.3 Rise in per capita income 1.4.4 Changes in the pattern of trade 1.4.5 Changes in the Social Environment 14.6 Views of Adam Smith, Marx ,List and Rostow 1.5 1.6 Summary Key Concepts
1.1 Introduction:
The term industrialization is generally used in two different meanings. In the narrow meaning, it refers to the establishment and development of the production of the means of production: in the broad meaning, it refers to the completion of the industrial revolution and the transfer of the economy to industrial methods of production.
But in the context of developing countries, the more meaningful definition of industrialization would be as follows: Industrialization is a system of economic development in which the major part of the national resources are used to develop a technically up-to-date, diversified national industry capable of assuring a high rate of
growth for the economy as a whole and of overcoming economic and social backwardness. In general the Industrialization is the process of manufacturing consumer goods and capital goods and of creating social overhead capital in order to provide goods and services to both individuals and businesses. As such industrialization plays a major role in the economic development of underdeveloped countries. Industrialization is a pre-requisite for economic development as the history of advanced countries shows. For development, the share of the industrial sector should rise and that of the agricultural sector decline. This is only possible through a policy of deliberate industrialization. As a result, the benefits of industrialization will trickle down to the other sectors of the economy in the form of the development of agricultural and service sectors leading to the rise in employment, output and income. In overpopulated underdeveloped countries there is overcrowding on the land, holdings are subdivided and fragmented and farmers practice traditional agriculture. For rapid development, LDCs cannot afford to wait for changes in farm practices to take place. Therefore, LDCs must begin with industrial development to supply fertilizers, farm machinery and other inputs so as to increase efficiency on the farm.
agriculture, transferring such workers to the industrial sector will raise aggregate output. Thus overpopulated countries have no choice but to industrialize. Further industrialization is essential for the following reasons besides above stated factors: (a) It brings increasing returns and economies of scale than in agriculture (b) To free from the adverse effects of fluctuations in the prices of primary products and deterioration in terms of trade. (c) It provides scope for using the new technology, new and diverse skills in larger enterprises. (d) It followed by urbanization, employment opportunities and incomes increase. (e) People enjoy the fruits of modernization in the form of a variety of goods and services available in urban centers due to industrialization. (f) It also affects the rural sector through the demonstration effect and tends to raise the living standards and promotes social welfare. (g) Industrialization brings social transformation, social equality, equitable distribution of income and balanced regional development in the process of economic development.
The effects of industrialization on the economy of a nation are many and varied. For the sake of convenience, they can be grouped into the following headings: 1) Structural changes in the economy 2) Beneficial effects on agricultural development 3) Rise in the per capita income 4) Changes in the pattern of trade and 5) Changes in the social environment.
The pressure of population on agriculture declines and the disguised unemployed people earning only a subsistence lively wood in agriculture are able to move out to industries where incomes are higher and prospects of progress brighter, thus industrialization brings with its strong forces of dynamism that help the developing courtiers in breaking the shackles of stagnation.
It has also been frequently observed that as a country passes through the phase of underdevelopment of development, the pattern of foreign trade undergoes a significant change. From a major exporter of primary products, the country slowly and gradually becomes a major exporter of manufactured products. The process of industrialization opens up new vistas for export diversification and a number of manufactured products start entering into the export basket. These products have elastic demand in international markets and fetch better prices. As a result, export earnings start looking up.
methods of production, having their decisive consequence over a relatively short period of time. This view would not deny the role of longer, slower changes in the shole process of economic growth. On the contrary, take-off requires a massive set of preconditions going to the heart of a societys economic organization and its effective scale of values. Moreover, for the take-off to be successful, it must lead on progressivelu to sustained growth; and this implies further deep and often slow-moving changes in the economy and th society as a whole. What this argument does assert is that the rapid growth of one or more new manfufacturing sectors is a powerful and essential engine of economic transformation.
1.5 Summary
On account of the above reasons, the Indian planners gave topmost priority to programmers of industrialization. They were convinced that the solution to the problem of backwardness lay in emphasizing the process of industrial development. Since the productivity of labor is the highest in the manufacturing industries, national income could be raised at a fast rate only through the establishment of industries on a wide scale. Moreover, industrialization induced development in other sectors. The growth of industrial sector was also deemed necessary as it was expected to absorb the rapidly increasing labor force of the economy. Moreover, it was expected to provide increasing opportunities to the underemployed people in the agricultural sector and help in reducing the pressure of population on land. As a part of long-term strategy of planned development, the main emphasis was on industrialization. Within the industrial sector itself, a very high priority was given to heavy capital goods industries. The experience of different countries has clearly shown that unless a country develops iron and steel, heavy engineering, machine tools and heavy chemical industries, it will fail to accelerate the pace of economic development. While this high priority to heavy capital goods industries has helped the country in
building up a strong industrial base and has given a sense of stability and continuity to the planning process, it has failed to generate enough employment opportunities so that there is no mass scale transfer of labor from the agricultural sector to the industrial sector.
Social Environment: Mention may be made an example here for social environment is of the caste system, spirit of competition and enterprise, literacy rate etc
1.7
State whether the following statements are True or False: 1. Industrial economics deals with the economic problems of firms and industries. 2. Industrialization leads to fall in the per capita income. 3. Industrialization breaks the shackles of stagnation. 4. Industrialization brings more economies of scale than in agriculture. 5. Export diversification is not possible through industrialization.
1.8
Self-Assessment Questions
Short answer type questions: a) What is Industrialization? b) Distinguish between Industrialisation and Industry? b) What is the need of Industrialization? Long answer type questions: a) Enlist the factors which are influence the industrial development?
b) Analyse the relationship between agriculture and industry c) Analyze the impact of Industrialization on employment
1.9
1. Misra, Puri 2. Kuschal.S 3. Sivaiah & Das 4. Bole Rao & Desai 5. Birthwal.R 6. Bhagwati.J.N & Desei.P 7. Chenery.H.B 8. Isher Judge Ahluwalia 9. Pramit Chaudhury 10. Cheruniliam
Indian Industrial Economy. Industrial Economics. Industrial Economics. Industrial Economics. Industrial Economics. India: Planning for Industrialization. Patterns of Industrial Growth, American Economic Review, September, 1960. Industrial growth in India- Stagnation since the mid 60s. The Indian Economy. Industrial Economics